Controversial Trump Fraud Ruling Raises Concerns About the Future of Family Business

Mon Feb 19 2024
Mark Cooper (3147 articles)
Controversial Trump Fraud Ruling Raises Concerns About the Future of Family Business

There will be a significant hole in Donald Trump’s bank account as a result of the $355 million New York fraud verdict, but his firm may suffer the most from the nonmonetary penalties.

The judgment by Justice Arthur Engoron on Friday prohibits the former president, his sons Eric and Donald Trump Jr., from holding executive positions at the Trump Organization or any other New York-based corporation for a period of three years, while the second and third terms are for two years each. For the next three years, neither Trump nor his companies will be able to borrow money from any bank that is either incorporated or registered in New York.

With these constraints in place, Trump’s real estate empire will have to rethink its operations both within and outside of New York, all while being closely monitored by a court-appointed official. The judge mandated that the Trump Organization appoint an impartial director of compliance.

Since the majority of major U.S. banks are either registered or have charters with New York, attorneys suggested that the borrowing prohibition might have the most significant impact.

According to Saul Ewing legal partner Evan Gotlob, “When you are a realtor, you need money.” “That decision severely limits their capacity to secure funding for global construction projects.” Trump claimed he could still secure loans from other sources, but that doing so would be more difficult and involve smaller institutions.

New York Attorney General Letitia James filed accusations, and Engoron agreed with them. The Trumps were found guilty of many civil fraud violations in a years-long plan to inflate the former president’s wealth in order to get better terms from lenders.

Trump claimed the banks were eager for the business and earned good money off of the deals, so he branded the case a political hit operation meant to derail his run for president again. “There was no fraud,” Trump stated on Friday night. Every single one of the banks got its money. They are immensely fond of Trump.

While their father has been preoccupied with politics rather than business in recent years, the company has been controlled by Eric Trump and Donald Trump Jr.

Business in the state would suffer as a result of the verdict, according to a Trump Organization spokesperson. She argued that the verdict would hasten the ongoing flight of companies from New York if it were to remain in effect.

An appeals court, which has temporarily halted portions of Engoron’s September verdict, could grant Trump’s request for a stay.

Trump may find himself in a bind due to the interest-laden $355 million New York fraud penalty. According to the NY AG’s office, he is already over $100 million in debt for the fraudulently obtained financial perks.

For Republican presidential front-runner Trump, Friday’s decision summed up a hectic week of legal developments as he ran his campaign. While arguing for immunity from federal charges related to election interference, Trump requested the assistance of the U.S. Supreme Court this past Monday. A separate New York judge scheduled his criminal trial to begin on March 25, on claims that he altered company records to cover up hush money given to a porn star. The trial was supposed to begin on Thursday. During a hearing to decide if she should be removed from the racketeering case against Trump, Fulton County District Attorney Fani Willis was questioned about her romantic involvement with a prosecutor on the same day in Georgia.

Even though Trump’s Friday ruling was terrible, it might have been much worse.

The judge rejected harsher punishments that James had requested, such as a lifetime prohibition on Trump holding the position of chief executive officer for any firm with a New York registration. Another decision that seemed to have ordered Trump’s companies to be wound down was rescinded by Engoron.

You have my whole attention. Speaking as an expert in the field, Gregory Krakower, who served as a senior advisor to New York Attorney General Eric Schneiderman, claimed that such occurrences are rare. “However, the death penalty for corporations has been withdrawn by the judge.”

There are a number of grounds that Trump can use in his appeal to challenge, at the very least, the breadth and magnitude of Engoron’s decision. The judge’s assessment of the amount of money Trump saved by securing cheaper credit was the basis for nearly half of the monetary penalties issued. The $187 million that Trump acquired from the sale of two properties was also recouped by Engoron. There were some in the legal community who expressed concern that the judge’s calculation of Trump’s alleged illegal gains was too hypothetical to stand up to scrutiny.

According to Columbia Law School professor John C. Coffee Jr., “this is one area where Trump’s chances on appeal are greatest.” I am researching business and securities law.

The ex-president may also claim that James overstepped her bounds in bringing the prosecution under the expansive civil-fraud statute she employed, especially since there were no identifiable victims of the alleged wrongdoing.

An unsuccessful fraud lawsuit that the NY AG’s office filed against Domino’s Pizza is likely to be referenced by Trump’s legal team. Allegedly, the chain’s back-office software system routinely underestimated franchisees’ wages, according to the state. No evidence was found to support the state’s assertion that Domino’s franchisees were deceived regarding the software system’s capabilities. In 2021, a court in Manhattan dismissed the case, reasoning that the claims were too weak to justify a state enforcement action and that the subject would be best handled in private contract litigation.

By putting up an appeal bail, Trump can put off paying the verdict until after his appeal. To ensure he pays the verdict if it’s upheld, he may need to rely on surety insurance firms. Collateral, such cash, bank letters of credit, investments, or even real estate, would be needed to secure the bond in such a case.

The exact amount of Trump’s liquid assets is unknown, although his net worth is believed to be close to $3 billion. He admitted in a deposition last year to having over $400 million in cash, which is less than what he would end up owing the state if his appeal is unsuccessful.

“He might have to have a real estate fire sale to pay for it,” Coffee remarked.

No matter the result of the upcoming brutal legal struggle, the Trump Organization may still be able to find ways to succeed.

Blank Rome real estate lawyer Massimo D’Angelo said the firm might continue operations regardless of the outcome of the appeal.

“Indeed, they would flee from that place where they are looked down upon and unable to do business,” D’Angelo remarked. “However, they might find success in different jurisdictions.”

Mark Cooper

Mark Cooper

Mark Cooper is Political / Stock Market Correspondent. He has been covering Global Stock Markets for more than 6 years.